The FTWeekend is my bible. The daily version has too much “noise” and I find it easier to identify trends with only a weekly fix. Here is what caught my attention yesterday morning.
Bullish forecasts boost fund flows
Flows into equity funds are poised for their best start to the year since at least 2013 as markets achieve fresh highs on enthusiasm about economic growth throughout the world.
In the latest week , investors poured $23.8 billion into equity funds taking the year-to-date total to more than $40 bn, according to EPFR Global estimates.
The rush to global equities comes as investors celebrate a global scenario of synchronised economic growth.
”Everyone thinks the Goldilocks scenario will continue in 2018, but some of us are worrying this is the last hurrah,” said Max Gokhman at Pacific Life Advisors.
Among the indices that have hit fresh highs this year are the US S&P 500 and the UK FTSE 100.
I have been fretting about the over-exuberance of equity markets in the US, Europe and the UK for some time. Now, in the same edition of yesterday’s FTWeekend the cracks are showing. Look at these UK companies.
Shares in Provident Financial have fallen from a 52 week high of £32.94 to £6.98; Carillion from £2.50 to zero; Dignity from £27.91 to £9.62; Capita from £7.20 to £3.63; Carpetright from £2.55 to £0.95. All these disaster stories have differing narratives but they all have one thing in common. Their share prices were wildly over-valued. Many other shares are similarly over-valued but not by so much. The five examples I have cited will surely cause investors to think about their exposure to equities and start sidling towards the exit?
Of course you are completely right. A correction is due. But will it be the end of the bull run ? Many people have argued repeatedly over a number of years that the current bull market is about to be a cooked goose. And yes there were a number of corrections. But having stayed in thus far has paid off handsomely well. One day those who warn of impending doom will get it invariably right……….so far the surprises have been on the upside. Perhaps you will be right this time……….
Erik, you are too modest to spell out your point. A friend of ours consistently went short of the S&P in the 1990s and eventually she was proved right but her costs and her opportunity loss exceeded her missed gain. I am in a similar position. I’m not maximising my returns in what I see as the end of a bull market because it’s hard to get out when the market turns. It would be interesting to know what exposure I have to those failing companies I wrote about through managed funds – but it might be depressing.
Equities have in the long term proved considerably better than cash or bonds.
But you only have to miss out on a few of the periods when equities were doing well for ………
And don’t overlook that the FTSE isn’t currently that much higher than it was 18 years ago.
Lastly I like to hear from “Bears” where they plan to put their dosh !?
Richard, I’ve just replied to Erik, saying that I have been missing out for maybe two years on full exposure to the surge in the price of equities. I don’t know where an old-fashioned grizzly bear puts his dosh in a bear market. I put mine in funds with exposure to emerging markets, bonds, gold and IT stocks. I also have faith in fund managers. Since I started building a position in Monks Investment Trust, less than two years ago, it has gone up by 40% on my holding. Maybe more luck than good judgement.
I don’t think that the fall from grace of the Companies you mention are any reflection of the markets as a whole. The world moves on and some things go out of fashion- lavish funerals, fitted carpets and doorstep lending. The Companies you cite can be matched by others whose price has soared as they rise on the crest of a wave- decent mixers, life assurance in Asia and cyber security for example. You prefer collective financial vehicles but I think that your acute sense of observation of social trends would make you an excellent stock picker.
What kind words but how wrong you are. However,at the dawn of the Internet shopping revolution it was apparent that it all depended on a reliable delivery network. The obvious solution, I thought, was the milkman so I bought shares in Express Dairies in June 2001. I sold them in October 2003 and made a bit more than 30% but that was not because of my theory.